FHA Loan Qualifications - Non Traditional Credit Accepted
FHA LOAN QUALIFICATIONS for NON TRADITIONAL CREDIT - Are you looking for a mortgage but THINK you have no "real" credit history? No FICO score? Maybe you don't use credit cards or don't have a car payment. No problem...You can still qualify for FHA Loan programs
"...Just because you havn't established typical trade lines with Experian, Trans union or Equifax is no reason to shy away from seeking an FHA loan. Chances are you are fine with your non traditional credit references."
Credit Reference Groups - FHA Loan Qualifications state that you'll need to prove 3 positive non traditional credit references from at least 1 of these two groups:
Group 1 - Non-traditional credit references consist of timely payments for rental housing, utility payments( gas, electric, water, sewer, garbage etc...). Other payments include telephone and cable bills. FHA likes to establish these first ( rather than group 2) as group 1 references have proven beeter accuracy predicting "credit responsibility".
Group 2 -
The second group digs a bit deeper regarding non-traditional credit sources. These include credit payment references such as: timely premium insurance payments from medical, auto, life, renters etc... Payment to day care, 12 month bank deposit records showing increasing bank balance. You can also use loan payment records from an individual loan agreement you have made with someone as long as the loan terns and repayment records have been well documented.
FHA Non Traditional Guidelines
Now you know what you can use as non traditional credit references, the next question is how does FHA evaluate non traditional credit and make a determination as to you qualifying for a mortgage or not? FHA loan qualification using non traditional guidelines - FHA wants to see 3 strong non-traditional credit references, That conform within these parameters:- :: No late payments on rental or housing - verify with landlord
- :: Only 1- 30 day late allowed on other group 1 or group 2 payments within 12 months
- :: No collection accounts within the last 12 months - one exception is medical accounts
- :: No late payments on rental or housing - verify with landlord
- :: No more than 1 - 30 day late payment on any group 2 reference.
- :: No court records, judgements or collections other than medical within the last year
- :: Front end ratio - PITI - must not exceed 31% and total hosing cost - back end ratio - must not exceed 43%.
- :: Need two months cash reserves following closing - these cannot be gifts - must be sourced from the borrower.